The lasting appeal of Powers of Attorney – safeguarding the vulnerable by Sponsor Brewin Dolphin

For some the summer months can be a relatively quiet time often interspersed with well-needed holidays whether in sunshine or the rain. By contrast it isn’t traditionally the season for contentious legal pronouncements, which made the surge in commentary (see The Law Society’s Gazette and elsewhere) concerning powers of attorney all the more unexpected, but interesting. Certainly the commentary is worthy of reflection by anyone - solicitors, related professional bodies, or members of the general public interested in the circumstances where individuals can be granted the authority to manage the affairs of others.

 

The spark to the Summer’s interest were comments made by retired Senior Judge Denzil Lush on the merits of Lasting Powers of Attorney (2.5m of which are currently registered), subsequently picked up by the BBC and other major news-outlets (http://www.bbc.co.uk/news/uk-40887323).  These in turn prompted responses from a number of solicitors (for instance see Solicitors for the Elderly Director Karon Walton speaking to the BBC http://www.sfe.legal/industry/media).

 

What is a power of attorney?

 

As many readers will already know, a Power of Attorney is a legal document that lets an individual (the ‘donor’) appoint one or more people (known as ‘attorneys’) to make decisions on his or her behalf. According to the Office of the Public Guardian, the purpose of the appointment is to give donors “more control over what happens to you if you have an accident or an illness and can’t make your own decisions” https://www.gov.uk/government/organisations/office-of-the-public-guardian.

 

Whilst powers of attorney are not exclusive to old age, age is clearly a crucial factor in the rise in related appointments. At the time of the 2011 consensus, individuals aged 65 and above made up 16.4% of the UK population.  By 2014 this had increased to 17.7%, whilst by 2024 it is forecast to increase to 19.9% and rising (Source ONS).  We are all tending to live longer than past generations, and as the proportion of the elderly population increases so does the likelihood of individuals developing a form of mental incapacity. For the first time in 2015, dementia and Alzheimer disease became the leading cause of deaths in England and Wales, accounting for 11.6% of all deaths registered, replacing ischaemic heart diseases as the previous main cause of death.

 

One in three people born in 2015 will develop dementia (Alzheimer’s Research UK). 27% of males born in 2015 will develop the condition compared with 37% of females born (largely due to longer life expectancy in females).

 

A red flag

 

So what particularly bothered Denzil about the existing system? Well in brief he warned that a lack of safeguards in the power of attorney system in England and Wales exposes it to potential abuse, and in particular that he would never sign one himself.  Such concerns are not necessarily new but it is Denzil’s provenance in this area that perhaps gives his comments greater force.  Prior to retirement, Denzil had been the twentieth and final Master of the Court of Protection (1996-2007) and became the first Senior Judge of the Court of Protection when the Mental Capacity Act 2005 came into force on 1 October 2007. With this pedigree and having adjudicated over 6,000 power of attorney cases, Denzil’s opinions are clearly worthy of consideration. 

 

Whilst Denzil’s negative personal experience of powers of attorney should be seen in the wider context of many contrasting positive experiences, the granting of such power does need to be properly considered in advance and would often benefit from subsequent scrutiny to help ensure that it is being properly exercised.

 

Crucial safeguards during investment advice

 

As a provider of wealth management expertise, safeguarding clients’ affairs is an essential part of our services. Whilst the value of financial investments differs from client to client, it is not uncommon for us to manage not inconsiderable sums on behalf of an individual.  We are very conscious that things can and will happen during a person’s lifetime (increasing age being one of these) that may affect his or her ability to directly control their own affairs. 

 

For instance in our experience it is not uncommon for a surviving spouse with a large IHT liability to lose capacity, and without a power of attorney in place it can be very difficult to arrange an immediate care annuity or qualifying IHT schemes such as an AIM portfolio.  Where the problem is brought to our attention after the event we often hear family members remark, “if only”.

 

Consequently where we act for an individual we always discuss the advantages of appointing a power of attorney. As a result we find ourselves working closely with a great many lay and professionally appointed attorneys, and our experience of the system has been a largely positive one.  It certainly helps that we have been able to establish many long-standing relationships with professionally appointed attorneys, and have considerable awareness of the issues and demands that many attorneys face.

 

Mirroring the advice of the Solicitors for the Elderly, we always advise our clients to give any power of attorney careful consideration and we would invariably recommend a professional appointment such as a solicitor. We recognise that not only are solicitors professionally trained and qualified to oversee an individual’s ongoing needs, but also benefit from additional regulatory and insurance safeguards, as well as an unbiased position. 

 

Reporting a concern about an attorney or deputy

 

Whilst no appointment can be entirely without risk, professional attorney appointments should help allay the concerns raised by Denzil, and give clients greater confidence in what remains a positive system.

 

For anyone with concerns about an attorney, for instance the misuse of money or decisions that aren’t in the best interests of the person they’re responsible for, they can contact the Office of the Public Guardian https://www.gov.uk/report-concern-about-attorney-deputy

 

Ability to appoint a DFM

 

In September 2015, the OPG (Office of the Public Guardian) published guidance on the circumstances in which attorneys acting under a Lasting Power of Attorney (LPA) can delegate investment management decisions to a discretionary investment manager. The guidance says that an attorney may appoint a bank or an IFA to act on their behalf to make investment decisions but only where specific wording, along the following lines, has been incorporated into the LPA: ‘My attorney(s) may transfer my investments into a discretionary management scheme. Or, if I already had investments in a discretionary management scheme before I lost capacity to make financial decisions, I want the scheme to continue. I understand in both cases that managers of the

scheme will make investment decisions and my investments will be held in their names or the names of their nominees’.

 

Although there is debate over whether the OPG’s guidance is correct it may be prudent for the above wording to be included by the donor prior to any loss of capacity.

 

Matthew Still is Head of Relationship Management – South West Professional Services, for Brewin Dolphin Wealth Management. Brewin Dolphin provides a range of financial planning and investment management services for solicitors, accountants and mutual clients

https://www.brewin.co.uk/solicitors-and-accountants

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